2016 (7) TMI 591 - AT - Central Excise

Cenvat Credit on capital goods - simultaneous availing depreciation - The appellant in the year 2004-05 availed cenvat credit to the tune of 50%, i.e. amounting to ₹ 104828/- and remaining 50% capitalized and claim the depreciation on the total assessable value and 50% of excise duty, i.e. ₹ 104828/-. In the year 2005-06, the appellant reduced an amount of ₹ 104828/- from the capital account and availed cenvat credit of the said amount as remaining 50%. The show cause notice was issued proposing denial of cenvat credit. - Held that - As per Rule 4(4), it clearly provides that only part of the value of capital goods which represents the amount of duty on such capital goods, which the assessee claimed as depreciation shall not be allowed as cenvat credit. In the present case, the part of the value, which claimed as depreciation, is ₹ 16569/- only. Therefore, to this extent the appellant is not entitle for the cenvat credit, however the remaining amount, i.e. ₹ 88263/- (Rs. 104832-16569/-) is eligible as cenvat credit to the appellant for the reason that in respect of this amount of ₹ 88263/-, depreciation was not claimed. - Decided partly in favor of assessee.

Summary

Issues:

1. Denial of cenvat credit under Rule 4(4) of Cenvat Credit Rules, 2004.
2. Interpretation of Rule 4(4) in relation to depreciation claimed under the Income Tax Act, 1961.
3. Applicability of judicial precedent in determining cenvat credit eligibility.
4. Calculation of admissible cenvat credit based on depreciation claimed.

Analysis:

Issue 1: The appellant availed cenvat credit for 50% of the total duty in 2004-05 but did not claim depreciation on this amount, thus not violating Rule 4(4) of Cenvat Credit Rules. The first 50% credit was allowed. However, in 2005-06, the appellant reduced the remaining 50% from the capital account before availing cenvat credit, which included depreciation claimed. The rule prohibits cenvat credit on the portion of duty claimed as depreciation.

Issue 2: Rule 4(4) explicitly states that cenvat credit cannot be allowed on the duty amount claimed as depreciation under the Income Tax Act. The judgment clarifies that only the portion of the duty amount representing claimed depreciation is ineligible for cenvat credit. In this case, the appellant claimed depreciation on a specific amount, making only that portion ineligible for credit.

Issue 3: The Revenue relied on a Karnataka High Court judgment to support the denial of cenvat credit based on claimed depreciation. However, the judgment cited involved a different scenario where the entire remaining 50% duty was claimed as depreciation. The Tribunal distinguished this case, emphasizing that the appellant only claimed depreciation on a part of the amount.

Issue 4: The Tribunal determined the admissible cenvat credit by calculating the depreciation claimed and deducting it from the remaining 50% duty. The appellant was found eligible for cenvat credit on the portion where no depreciation was claimed, resulting in a modified order allowing credit for specific amounts in 2004-05 and 2005-06.

In conclusion, the Tribunal partially allowed the appeal by modifying the order to grant cenvat credit for specific amounts in the respective years based on the correct interpretation of Rule 4(4) and the depreciation claimed. The judgment provides a detailed analysis of the application of the rule and relevant legal precedents to determine cenvat credit eligibility in the given circumstances.